Friday, February 26, 2016

Most entrepreneurs are so overwhelmed by the day-to-day challenges of their business that they rarely take the time to work on longer-term strategy (they work in the business versus on the business). As a result, strategy decisions are made in the same ad-hoc crises style as operational decisions, and the business suffers. Gut reactions are rarely the optimal solution to any problem.

In reality, the discipline most often reserved by entrepreneurs just for strategic decisions should be used for all decisions, including operational ones. As detailed in a new book, “Smart Decisions,” by Dr. Thomas N. Martin, decision makers need to develop and practice the art and science of strategic decision making early in their career to thrive in this complex business world.

I support his assertion that good ethical decisions are best made by applying the following ten steps to the analysis and decision process:

Start with creativity to expand decision alternatives. The act of coming up with alternatives forces everyone to dig deeper and look at the problem from different angles. This will force you to step outside your normal patterns of thinking and come up with more innovative solutions. Decisions made without innovation lead to a stale business.

Evaluate alternatives through a future-oriented lens. All decisions and actions have immediate as well as future consequences. For example, it is only from the perspective of future orientation that the decision to re-invest profits, versus distributing them, makes any sense. Decisions made for immediate relief feel good, but rarely add long-term value.

Learn from previous results to eliminate repeat mistakes. Making a wrong decision once means you are willing to take risks, but repeating that same mistake a second time means you didn’t learn anything. Own your bad decisions, with no excuses, but wisdom is the accumulation of learning and experience and is required to succeed in business.

Don’t try to satisfy everyone with every decision. Trying to please everyone can cause you to lose sight of your values and strategic goals. Certainly you must actively listen to the opinions, suggestions, and ideas of others, but the decision has to be yours, even in the face of second guessing from those with negative consequences.

Test the quality of information available for analysis. If you're not using data to make decisions, you're flying blind, and gut decisions are based primarily on emotional data. To assess objective data quality, look for completeness, consistency, and timeliness, relative to the decision at hand. The best analysis done on bad data will still yield a bad decision.

Ask open-ended questions to stimulate critical thinking. The ability to ask and answer questions is central to both thinking and learning. The “5 Whys” is another iterative technique used to determine the root cause of a problem or stimulate creative and in-depth thinking. Every entrepreneur benefits from critical thinking and learning.

Don’t allow information paralysis to delay reaching a decision. Analysis paralysis is the state of over-thinking a decision, to the point where a choice never gets made, or is made too slowly. Always identify your top objective for any specific decision, and use that to drive you in decision making. Timeliness must always be a top business objective.

Factor in personal values, assumptions, and intuitions. These are valid and important in any decision, but need to be communicated effectively to all constituents in order to foster total understanding and support. Perceptions are as important as reality, and the wrong perception of your decision rationale can derail even the best effort.

Always define one or more backup or contingent solutions. Contingency plans make sense in every case where you don’t have all the decision information you need, or there are factors involved that you can’t control, such as regulations, economic conditions, or market trends. They should never be used as a shortcut for not doing proper analysis.

Communicate the primary solution to all, with implementation steps. Decisions without a viable implementation plan are counter-productive. Thus the best entrepreneurs map out an implementation plan, and make sure everyone understands what has to be done and how to do it. Finally, they monitor and manage the rollout, with required pivots.

In fact, the business decision-making steps and process have to be uniquely applied to three situational states – the current state, a future state, and the transitional state in between. The author defines a detailed framework and process that fits all three of these to make the best decision possible, whether it be strategic or operational. It’s an art and a science that will make or break your business. How much of your time do you spend now working on your business?